18 Sep 2017

Fighting with your spouse? A 2nd mortgage might fix your marriage and your money

Did you know that 30% – 40% of couples who get divorced do so over money. Divorce isn’t cheap either, so now is the time to fix your fighting and your finances!

Are second mortgages a good idea? Sure, as long as you have an exit strategy and how it will get paid off at the least amount of cost.

With any debt consolidation loan, second mortgage or other options; you want to ensure you can afford the payments, look at all debt repayment options and work with a debt or mortgage planner to ensure you are achieving your goal. Don’t just band aid a problem…

So let’s take a look at a real life household family situation…

Jack and Jill own a home, have two young kids, a furry friend, a camping trailer and two vehicles. Jack and Jill both work making about $110,000 a year combined. In the past, Jill took a few years off on maternity leave and during that time, the income dropped and the debts increased. The hot water tank flooded the basement, so add $3,000 for a new tank onto the credit card. They figure they can pay it off in a few months. Then, Jill’s best friend decided to have a destination wedding! Well fun times, but it also costs Jack and Jill $5,000 to go to Hawaii to be part of the wedding. In keeping up with the Jones next door, they bought a trailer to go camping and the proud owner of  a $45,000 loan of 8% and $300 a month payments. What’s $300 right? Then Jack needed a Dodge Ram 1500 to tow their new trailer and got a $45,0000 loan at $700 per month. Yikes, insurance for those just increased your monthly payments from $130 a month to $160 a month…oh and the GAS! It’s for the family, so they tighten their budget spending.  While camping, Jack injures his back while goofing around with his ATV and is off work for 2 months and collecting EI…and the debt snowball monthly payment crunch effect begins and so does the depression, fighting and sometimes separation. Not enough money at the end of the month.  Sound like your family? This was also my story about 16 years ago, so I can empathize with you.

Getting out of debt might require some hard decisions, such as selling assets. Challenge is the value of the new trailers, trucks and toys drops up to 10% when you drive it off the lot and your loans are usually higher than your toys. Many times there is lots of equity in home that you just can’t access right now due to credit issues or you just don’t want to break your existing mortgage (eek penalties). In a year or two you know you can wrap all the debt into your 1st mortgage and your payments will all be back in affordability line. It’s all in the planning and everyone’s family and financial situations are unique.

“Why not just get a consolidation loan from the bank”, the client asks…

Absolutely! IF you can qualify. If your financial strife has caused you late payments, then your credit score took a swan dive to the “sorry can’t help you land” from the Bank.

Also, Banks can only loan you up to 65% of the value of your home due to new government rules and you need to have enough income to qualify for your new loan. Today, there are more declined debt consolidation loans than ever and people are seeking out expensive debt repayment programs or bankruptcy options that have up to $4500 in freaky fees and can kill your credit for up to 7 years. While these programs can be helpful for some, they’re not always required to fix the problem.

How do second mortgages work out there in Google Land?

Just Google second mortgages and you may find many well know companies and mortgage experts who offer them. They may be called home equity loans, debt consolidation loans or freedom loans…they are all second mortgages with a “pretty name” and no plan.  Finding the right company who isn’t going to charge you a 10% fee, 14% rates and huge renewal fees is another story. An example of a second mortgage story where this happened. Client needed $40,000, finance company charged a $4000 fee and 11% rate for a 1 year term with a renewal rate of $2000. Bad planning here. Paying 10% fee and $2000 renewal rate is highway robbery in my opinion!

If you own a home, I can help. Maybe it’s not a second mortgage you need…maybe it’s a reality check conversation and some idea tossing and budget planning.  If it is a second mortgage you really want or need…I have made it my mission in life to make sure the average family going through life events isn’t getting screwed along the way.

If you’re feeling overwhelmed with debt, and your story sounds like Jack and Jill…contact a Dominion Lending Centres mortgages specialist.

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Kiki Berg

Dominion Lending Centres - Accredited Mortgage Professional
Kiki is part of DLC Hilltop Financial based in Langley, BC.

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